EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of February 28, 1994, is by and between NEI
Acquisition Corporation, a Texas corporation ("Company"), and Xxxxxxx X. Xxxxxxx
("Executive").
W I T N E S S E T H:
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WHEREAS, Executive has extensive experience and contacts in the commercial
printing business; and
WHEREAS, Company desires to utilize Executive's experience and contacts by
employing Executive in accordance with the terms and conditions of this
Agreement; and
WHEREAS, Executive desires to be employed by Company in accordance with the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth below, the parties hereto agree as follows:
1. Employment. Company agrees to employ Executive, on the terms and
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conditions set forth below. Executive's job title shall be President and Chief
Executive Officer (or such other position as Company and Executive may mutually
agree) and his duties shall include those customarily performed by a chief
executive officer of a corporation, and performing such other similar services
for Company as may be directed from time to time by the Board of Directors of
Company. Executive agrees during the term of his employment to devote his full
business time (at least 40 hours per week) and his best efforts, skills and
abilities exclusively to the performance of his duties as stated in this
Agreement and to the furtherance of Company's business. Executive shall also
use his best efforts to preserve the business of Company and the good will of
all employees, customers, suppliers and other persons having business relations
with Company.
2. Term. The employment of Executive shall begin on the date of this
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Agreement and shall continue until the earliest of:
(i) the date Company terminates it for "just cause" upon three days written
notice,
(ii) the death or disability of Executive,
(iii) the Expiration Date (as defined below),
(iv) the date Company terminates it without just cause upon 30 days written
notice, or
(v) the date Executive terminates it for any reason (it being understood by
the parties that any resignation by Executive from his employment, unless
specifically requested by Company, shall be deemed a termination by Executive).
For purposes of this Section 2, "just cause" for termination shall mean:
(i) the failure or refusal of Executive to comply with the reasonable rules
and procedures established by the Board of Directors of the Company or to employ
reasonable acts or services, as and when requested, from the Board of Directors
of the Company (except when such performance would be a violation of any
existing law) for a period of 30 days after written notice of such failure or
refusal;
(ii) the failure of the Company to achieve approximately 85% of "Budgeted
EBITDA" (as defined hereinafter) in any fiscal year, as derived from the audited
financial statements of the Company during each fiscal year and as specifically
set forth below:
Year Ending
March 31, Budget 85% of Budget
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1995 $1,542,000 $1,311,000
1996 1,912,000 1,625,000
1997 2,168,000 1,843,000
1998 2,559,000 2,175,000
1999 2,860,000 2,431,000
(iii) the indictment of Execu tive for any felony, failure to abide by the
terms of this Agreement, or the com mission of an act of bad faith, fraud,
embezzlement, misappropriation, dishonesty, moral turpitude, or any act, or the
occurrence of state of facts, which renders Executive incapable of performing
his duties hereunder, or in the judgment of the Company, prove prejudicial to
the Company's best interest, or which adversely affects or could reasonably be
expected to adversely affect the Company or the Company's reputation.
Subject to the foregoing, the parties agree that this Agreement shall be
for an initial term of five years, and shall be automatically renewed for
additional successive one year terms; provided, however, Company may terminate
this Agreement effective as of the last day of the initial five year term, or
the last day of any successive one year term (as applicable, the "Expiration
Date"), upon written notice of termination to Executive at least 30 days prior
to the end of the then current term.
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Notwithstanding anything to the contrary in this Agreement, the provisions
of Sections 5, 6 and 7 shall survive any termination of Executive's employment
under this Agreement.
3. Compensation.
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(a) Base salary. Executive agrees to accept as full consideration for his
employment, $160,000.00 per year during the term of this Agreement, payable in
accordance with Company's standard payroll procedures, subject to all
appropriate withholdings. Executive's salary will be reviewed annually by the
Board of Directors of the Company.
(b) Bonuses. Executive shall be entitled to receive bonuses from the
Company as follows:
(i) In the event that the Company purchases certain commercial printing
presses from Computer Language Research listed on Schedule I hereto at a
cost (including acquisition costs, all transportation, installation and
similar costs, and the cost of any other assets necessary to make such
equipment fully functional and operational) of less than $400,000,
immediately following such purchase and installation, Executive
shall be entitled to receive a bonus equal to 50% of such deficiency.
(ii) Executive shall be entitled to receive a bonus with respect to
each year of operations in which he is employed by the Company equal to 25%
of the Company's "Free Cash Flow" (as defined herein); provided, however,
that so long as the Company has achieved 100% of "Budgeted EBITDA" (as
defined) for its fiscal years ended March 31, 1995 and/or 1996, such bonus
shall not be less than $25,000 with respect to fiscal 1995 and/or $50,000
with respect to fiscal 1996, as the case may be. The bonus shall be payable
as soon as practicable after the computation of Free Cash Flow from the
audited financial statements of the Company with respect to each fiscal
year of operations. As used herein:
(A) "Free Cash Flow" with respect to any fiscal year shall mean
EBITDA less debt service (principal and interest), capital expenditures,
management fees and income taxes, for such fiscal year; all as computed
in accordance with generally accepted accounting principles consistently
applied.
(B) "Budgeted EBITDA" shall mean $1,542,000 for the year
ended March 31, 1995, $1,912,000 for the year ended March 31, 1996,
$2,168,000 for the year ended March 31, 1997, $2,559,000 for
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the year ended March 31, 1998 and $2,860,000 for the year ended March 31,
1999.
(C) "EBITDA" with respect to any fiscal period shall mean earnings
before interest, taxes, depreciation and amortization (before management
fees and bonuses) for such period, as computed in accordance with
generally accepted accounting principles consistently applied.
(c) Car allowance. Executive shall receive a car allowance of $500 per
month to be used to pay the reasonable operating and maintenance expenses of an
automobile related to its business use.
(d) Vacation, medical insurance and fringe benefits. Executive shall be
entitled to four weeks paid vacation per year. Executive shall also participate
in all benefit plans in which employees of the Company participate and such
other fringe benefits as the Board of Directors of Company may, in its sole
discretion, determine.
(e) Business expenses. Upon proper documentation and compliance with
Company procedures by Executive, Company shall reimburse Executive for all
business expenses incurred by him on behalf of Company.
(f) Stock Options. Executive shall be granted an option to purchase 75,000
shares of Common Stock of the Company at an exercise price of $1.00 per share,
the terms and conditions of which are set forth in that certain Stock Option
Agreement in the form attached hereto as Exhibit A.
4. Compensation upon Termination.
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(a) Termination by Company for just cause; termination by Executive. Upon
termination of Executive's employment by Company for just cause or termination
by Executive, Company shall pay to Executive all compensation payable hereunder
that has accrued through the date of termination.
(b) Death or disability. Upon termination of Executive's employment as a
result of the death or disability of Executive, Company shall pay to Executive
(or his estate or legal representative, as the case may be) (i) all compensation
payable hereunder that has accrued through the date of termination and (ii) the
base salary which would have been payable to Executive had this Agreement
remained in effect for the 90 days subsequent to the date of termination. All
payments under clause (ii) above shall be made on the normal base salary payment
dates in the normal installments.
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(c) Termination by Company without just cause. Upon termination of
Executive's employment by Company without just cause (other than a termination
as of the Expiration Date resulting from the expiration of this Agreement),
Company shall pay to Executive (i) all compensation payable hereunder that has
accrued through the date of termination, (ii) the base salary which would have
been payable to Executive had this Agreement remained in effect for a period
equal to 12 months subsequent to the date of termination, and (iii) the prorated
portion (based upon the number of full months during which Executive was
employed by the Company) of the bonus which the Executive would have earned
hereunder with respect to the fiscal year during which Executive was terminated.
All payments under clause (ii) above shall be made on the normal base salary
payment dates in the normal installments. Executive's medical insurance shall
be continued for the same period for which salary payments are continued
hereunder.
(d) Repurchase of Common Stock. Upon termination of Executive's employment
with the Company, the Company shall purchase (subject to the prior approval of
Bank One, Texas, N.A. and Stratford Capital Group, Inc.), and Executive (or his
legal representative, as the case may be) shall sell to the Company, all shares
of Common Stock owned by the Executive (including the vested portion of any
unexercised stock option) at a price per share equal to the lesser of (A) the
quotient of (X) the excess of (i) 3.5 times EBITDA for the 12 months ending on
the month end immediately preceding the termination date of Executive's
employment, less (ii) the amount of outstanding indebtedness and redemption
value of redeemable preferred stock as of such month end, divided by (Y) the
number of fully diluted shares of Common Stock of the Company as of such month
end, and (B) the Fair Market Value (defined below) of the Common Stock owned by
Executive. The exercise price of the vested portion of any unexercised stock
option shall be deducted from the Company's payment to the Executive. The "Fair
Market Value" for purposes of this subsection (d) shall be determined as
follows: The fair market value of the Common Stock of the Company owned by
Executive as mutually agreed upon by Company and Executive; however, if Company
and Executive are unable to agree as to the fair market value of such Common
Stock within twenty (20) days following Executive's receipt of notice of the
Company's election to exercise its option to purchase Executive's Common Stock,
the Company and Executive shall appoint a mutually acceptable appraiser with at
least five years of experience in appraising privately-held companies
("Qualified Appraiser") to value the Common Stock of the Company. If the
Company and Executive agree as to the Qualified Appraiser, they shall promptly
instruct the Qualified Appraiser to value the Common Stock with the
understanding that such Qualified Appraiser's valuation shall be the Fair Market
Value and shall be binding upon the Company and Executive. If the Company and
Executive are unable to mutually agree upon a Qualified Appraiser (within ten
days following the expiration of the 20-day period described above), each of the
Company and Executive shall appoint a Qualified Appraiser to value the Common
Stock of the Company. Each of
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the appointed Qualified Appraisers shall determine the fair market value of the
Common Stock within 60 days of their selection and shall deliver to each of the
Company and the Executive a copy of its appraisal within such 60 day period. If
the determination of each of the appointed Qualified Appraisers is 90% or more
but less than 110% of the average of the two determinations, the fair market
value shall be such average. If the determination of either of the appointed
Qualified Appraisers is less than 90% or more than 110% of such average, then
the appointed Qualified Appraisers shall, within five days thereafter, select a
third Qualified Appraiser. The determination of such third Qualified Appraiser
(which shall not be higher than the higher of, nor lower than the lower of, the
determinations of the two first appointed Qualified Appraisers), shall govern
and shall be final and binding on all parties.
5. Nondisclosure Agreement. Executive, during the term of employment
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under this Agreement, shall have access to and become familiar with various
trade secrets and proprietary and confidential information consisting of, but
not limited to, processes, computer programs, compilations of information,
records, sales procedures, customer requirements, pricing techniques, customer
lists, methods of doing business and other confidential information
(collectively referred to as the "Trade Secrets"), which are owned by Company
and regularly used in the operation of its business, but in connection with
which Company takes precautions to prevent dissemination to persons other than
certain directors, officers and employees. Executive acknowledges and agrees
that the Trade Secrets (1) are secret and not known in the industry; (2) are
entrusted to Executive after being informed of their confidential and secret
status by Company and because of the fiduciary position occupied by Executive
with Company; (3) have been developed by Company for and on behalf of Company
through substantial expenditures of time, effort and money and are used in its
business; (4) give Company an advantage over competitors who do not know or use
the Trade Secrets; (5) are of such value and nature as to make it reasonable and
necessary to protect and preserve the confidentiality and secrecy of the Trade
Secrets; and (6) the Trade Secrets are valuable, special and unique assets of
Company, the disclosure of which could cause substantial injury and loss of
profits and goodwill to Company. Executive shall not use in any way or disclose
any of the Trade Secrets, directly or indirectly, either during the term of this
Agreement or at any time thereafter, except as required in the course of his
employment under this Agreement. All files, records, documents, information,
data and similar items relating to the business of Company, whether prepared by
Executive or otherwise coming into his possession, shall remain the exclusive
property of Company and shall not be removed from the premises of Company under
any circumstances without the prior written consent of the Board of Directors of
Company (except in the ordinary course of business during Executive's period of
active employment under this Agreement), and in any event shall be promptly
delivered to Company upon termination of Executive's employment. Executive
agrees that upon his receipt of any subpoena, process or other request to
produce or divulge, directly or indirectly, any Trade
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Secrets to any entity, agency, tribunal or person, Executive shall timely notify
and promptly hand deliver a copy of the subpoena, process or other request to
the Chief Executive Officer of Company.
6. Noncompetition Agreement. Executive acknowledges and agrees that the
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training he will receive, the experience he will gain while employed and the
information he will acquire regarding the Trade Secrets will enable him to
injure Company if he should compete with Company in a business that is
competitive with the business conducted or to be conducted by Company. For
these reasons, Executive hereby agrees as follows:
(a) Without the prior written consent of Company, Executive shall not,
during the period of employment with Company, directly or indirectly, either as
an individual, a partner or a joint venturer, or in any other capacity, (i)
invest (other than investments in publicly-owned companies which constitute not
more than 10% of the voting securities of any such company) or engage in any
business that is competitive with that of Company or its affiliates, (ii) accept
employment with or render services to a competitor of Company or any of its
affiliates as a director, officer, agent, employee or consultant, (iii) contact,
solicit or attempt to solicit or accept business from any (A) customers of
Company or its affiliates or (B) person or entity whose business Company or its
affiliates is soliciting, (iv) contact, solicit or attempt to solicit or accept
or direct business that is competitive with such business being conducted by
Company or any of its affiliates during Executive's employment under this
Agreement from any of the customers of Company or any of its affiliates, or (v)
take any action inconsistent with the fiduciary relationship of an employee to
his employer. As used in this Section 6 and in Section 7 of this Agreement,
"affiliates" shall mean persons or entities that directly, or indirectly through
one or more intermediaries, control or are controlled by, or are under common
control with, Company.
(b) Upon any termination or cessation of his employment with Company for
any reason whatsoever, and for a period of two years thereafter, Executive shall
not, directly or indirectly, either as an individual, a partner or a joint
venturer, or in any other capacity (i) invest (other than investments in
publicly-owned companies which constitute not more than 10% of the voting
securities of any such company) or engage in any business that is competitive
with that of Company or its affiliates, (ii) accept employment with or render
services to a competitor of Company or its affiliates as a director, officer,
agent, employee or consultant, or (iii) contact, solicit or attempt to solicit
or accept business (A) from any of the customers of Company or its affiliates as
of the date of this Agreement or at the time of Executive's termination or
cessation of employment, or (B) from any person or entity whose business Company
or its affiliates were soliciting as of such time.
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7. Nonemployment Agreement. For a period of two years after the
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termination or cessation of his employment with Company for any reason
whatsoever, Executive shall not, on his own behalf or on behalf of any other
person, partnership, association, corporation or other entity, hire or solicit
or in any manner attempt to influence or induce any employee of Company or its
affiliates to leave the employment of Company or its affiliates, nor shall he
use or disclose to any person, partnership, association, corporation or other
entity any information obtained while an employee of Company concerning the
names and addresses of Company's employees.
8. Severability. The parties hereto intend all provisions of Sections 6
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and 7 hereof to be enforced to the fullest extent permitted by law.
Accordingly, should a court of competent jurisdiction determine that the scope
of any provision of Sections 6 and 7 hereof is too broad to be enforced as
written, the parties intend that the court reform the provision to such narrower
scope as it determines to be reasonable and enforceable. In addition, however,
Executive agrees that the noncompetition agreements, nondisclosure agreements
and nonemployment agreements set forth above each constitute separate agreements
independently supported by good and adequate consideration and shall be
severable from the other provisions of, and shall survive, this Agreement. The
existence of any claim or cause of action of Executive against Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of the covenants and agreements of Executive contained in
the noncompetition, nondisclosure or nonemployment agreements. If any provision
of this Agreement is held to be illegal, invalid or unenforceable under present
or future laws effective during the term hereof, such provision shall be fully
severable and this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision never comprised a part of this Agreement; and
the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this
Agreement, a provision as similar in its terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
9. Affiliates. Executive will use his best efforts to ensure that no
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relative of his or corporation of which he is an officer, director or
shareholder, or other affiliate of his, shall take any action that Executive
could not take without violating any provision of this Agreement.
10. Remedies. Executive recognizes and acknowledges that the
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ascertainment of damages in the event of his breach of any provision of this
Agreement would be difficult, and Executive agrees that Company, in addition to
all
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other remedies it may have, shall have the right to injunctive relief if there
is such a breach.
11. Acknowledgements. Executive acknowledges and recognizes that the
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enforcement of any of the noncompetition provisions in this Agreement by Company
will not interfere with Executive's ability to pursue a proper livelihood.
Executive further represents that he is capable of pursuing a career in other
industries to earn a proper livelihood. Executive recognizes and agrees that
the enforcement of this Agreement is necessary to ensure the preservation and
continuity of the business and good will of Company. Executive agrees that due
to the nature of Company's business, the noncompetition restrictions set forth
in this Agreement are reasonable as to time and geographic area.
12. Notices. Any notices, consents, demands, requests, approvals and
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other communications to be given under this Agreement by either party to the
other shall be deemed to have been duly given if given in writing and either (i)
personally delivered or sent by mail, registered or certified, postage prepaid
with return receipt requested, or by recognized next day delivery service,
addressed as follows: (i) if to Company, at its principal executive offices in
Dallas, Texas or (ii) if to Executive, at his address as set forth on the
payroll records of Company. Notices delivered personally shall be deemed
communicated as of actual receipt; mailed notices shall be deemed communicated
as of three days after mailing.
13. Entire Agreement. This Agreement supersedes any and all other
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agreements, either oral or written, between the parties hereto with respect to
the subject matter hereof and contains all of the covenants and agreements
between the parties with respect thereto.
14. Modification. No change or modification of this Agreement shall be
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valid or binding upon the parties hereto, nor shall any waiver of any term or
condition in the future be so binding, unless such change or modification or
waiver shall be in writing and signed by the parties hereto.
15. Governing Law and Venue. The parties acknowledge and agree that this
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Agreement and the obligations and undertakings of the parties hereunder will be
performable in Dallas, Dallas County, Texas. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Texas. If any
action is brought to enforce or interpret this Agreement, venue for such action
shall be in Dallas County, Texas.
16. Counterparts. This Agreement may be executed in counterparts, each of
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which shall constitute an original, but all of which shall constitute one
document.
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17. Costs. If any action at law or in equity is necessary to enforce or
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interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.
18. Estate. If Executive dies prior to the expiration of the term of
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employment, any monies that may be due him from Company under this Agreement as
of the date of his death shall be paid to his estate.
19. Assignment. Company shall have the right to assign this Agreement to
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its successors or assigns. The terms "successors" and "assigns" shall include
any person, corporation, partnership or other entity that buys all or
substantially all of Company's assets or all of its stock, or with which Company
merges or consolidates. The rights, duties and benefits to Executive hereunder
are personal to him, and no such right or benefit may be assigned by him.
20. Binding Effect. This Agreement shall be binding upon the parties
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hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and permitted assigns.
21. Waiver of Breach. The waiver by Company of a breach of any provision
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of this Agreement by Executive shall not operate or be construed as a waiver of
any subsequent breach by Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Company:
NEI ACQUISITION CORPORATION
By:____________________________________
Xxxxx X. Xxxxxx
Chairman
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Executive:
________________________________________
Xxxxxxx X. Xxxxxxx
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Schedule I
List of CLR Equipment to be Acquired
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